Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi America, Ltd. SEC Chairman Cox Uses Bully Pulpit to Champion XBRL
Written by Bob Schneider Posted on August 31, 2007
SEC Chairman Christopher Cox ranks among the most important and consistent champions of XBRL. Even strong supporters of the standard have been pleasantly surprised by how often the Chairman promotes interactive data (the SEC’s preferred term for XBRL) in public appearances.
To test whether these general impressions were empirically correct, I reviewed Mr. Cox’s speeches from September 2006 through August 2007 to determine the frequency and prominence of interactive data mention. My methodology was hardly scientific: I used the Find command to locate mentions of XBRL or interactive data in Mr. Cox’s speeches published on the SEC website. I likely overlooked a speech or perhaps missed a mention here or there. Nevertheless, I believe my review was sufficiently accurate to establish how often Mr. Cox talks about XBRL, and what that discussion is about.
In all, I noted mentions of interactive data in 16 of his 42 speeches, or 38%. However, I think this ratio understates the extent of Mr. Cox’s evangelizing efforts. First, the numerator includes few inconsequential, “in passing” references — Mr. Cox usually devotes several paragraphs to XBRL issues when he does talk about them. Second, the denominator includes talks on topics like “eliminating the short sale ‘tick test’” that even the most determined advocate of interactive data would have difficulty finding an XBRL angle. In contrast, there was only one venue — the Philadelphia XBRL Conference held in December where Mr. Cox’s reticence on interactive data would have indeed seemed peculiar.
Moreover, the politically savvy Chairman (he was a long-time Congressman) discussed XBRL among audiences such as the National Italian-American Foundation where he might well have chosen more palatable (if pandering) fare, such as the Italian contribution to double-entry bookkeeping. (He did, however, talk about A.P. Giannini, the founder of Bank of America, at length.)
One way or the other, there’s no doubt that Mr. Cox uses his bully pulpit with gusto to get the word out on interactive data. In his speeches, Mr. Cox makes many of the arguments XBRL supporters traditionally make for the standard: reduced error rates, increased transparency, improved analysis, and so on. But he also discusses benefits that are less well known.
For example, he notes one little-discussed advantage from the introduction of XBRL-enabled call reports for US financial institutions:
And now banks can even provide narrative, because that can be XBRL-tagged as well. As a result of this improvement, today only 5% of original reports need additional work. Before, as much as 34% of bank call reports were returned to banks for additional clarification. The old system lacked the technology to submit notes.
Mr. Cox thus does his best to dispel the persistent myth that XBRL reporting focuses exclusively on the numbers; in fact, he makes it clear that its advantages for reporting text information is manifest.
One other less-traveled area Mr. Cox delves into are XBRL’s benefits for internal control and attracting qualified directors:
Another way that interactive data can help smaller companies is by improving their internal controls, while at the same time reducing their compliance costs. That, in turn, can help attract qualified directors who will be more content with the risk profile of the firm. It also seems likely that interactive data will permit companies to reduce the amount of manual work involved in maintaining their internal controls over financial reporting, permitting them to simultaneously cut costs while enhancing compliance with Sarbanes-Oxley.
What struck me most about the Chairman’s speeches was how widely he ranges in discussing interactive data uses. In the business press, there is much attention given as there should be — to the question of whether the SEC will make XBRL mandatory for company financial statements. But Mr. Cox, while hardly ignoring the importance of the financials, looks at interactive data through a much broader lens. In addition to the call reports example, he discusses at length the role of interactive data in uncovering the backdating of stock options; its use for disclosing executive compensation data; and the adoption of XBRL for the risk/return summaries of mutual funds. When it comes to interactive data, Chairman Cox truly sees the Big Picture.
There had been some discussion that, in the event of the resignation of Alberto Gonzales, Mr. Cox would be a strong candidate for Attorney General and that his efforts on behalf of interactive data might be coming to an end. It now seems more likely that other names will be put forth. The XBRL community can heave a sigh of relief that its most important advocate will continue his work, and the Chairman’s audiences can look forward to more discussion of XBRL-related issues in his speeches.